| Not-for-profit is the fastest growing sector in the U.S. economy. The 501(c) (3) not-for-profit organizations comprise the largest group in this sector. These organizations are charity oriented, exempt from taxes, and restricted from distributing excess earnings to owners. There are no formal accounting procedures for judging, evaluating and comparing not-for-profits. The purpose of this exploratory study is to define the financial information needs of stakeholders, determine the data which will provide needed information, establish financial norms, and display the usefulness of the information provided.; Major findings of this research are: (1) Not-for-profit stakeholders need devices by which they can reach conclusions relating to financial viability, fiscal compliance, management performance, and cost of services provided. (2) Data useful for this purpose include amounts spent on fund raising (FR), management (MG), and program services (PS) as compared to total contributions (TC) and total revenue (TR). (3) Accounting literature reveals an abundance of material related to accounting standards for evaluation in the governmental and for-profit sectors. Techniques developed in these areas, especially ratio analysis, can be useful in not-for-profit evaluations. (4) Nine financial ratios for the not-for-profit sector (TC/FR, PS/FR, TR/MG, TC/MG, PS/MG, TR/(MG+FR), TC/(MG+FR), PS/(MG+FR), PS/TR) calculated using data in the Statistics Of Income (SOI) data base can describe not-for-profit organizations. (5) Models for rating not-for-profit organizations are developed in 5 NTEE functional areas using American Institute of Philanthropy (AIP) ratings, SOI data, research ratios, and factor analysis by means of regression and correlation theory. (6) Model validity, as shown by R{dollar}sp2{dollar}, using holdout samples of AIP rated organizations, ranges from.9564 to.8227.; The findings show that for each dollar the average not-for-profit organization spends 10 cents to raise it, 12 cents to manage it, and 77 cents of it on program. These amounts vary widely. For example, fund raising ranges from 3.7 cents to 25.6 cents merely on the basis of functional area. More research is suggested involving region, age, size, etc.; This study provides evidence that there is much that can be done with what now is available and serves as a basis for more in depth research. |
